Easing Some of the Concerns of Hospital-Employed Physicians

We keep hearing some of the most common complaints of hospital-employed physicians. Before turning to these complaints and ways to address them, one common issue I see most often is that physicians fail to undertake the necessary due diligence before entering into the hospital employment relationship– either because they rushed into the relationship without having their employment agreements carefully reviewed or because they failed to ask certain questions during their job interviews; and this lack of due diligence was as prevalent among older physicians as ones just coming out of their residency.

The most common general complaint of hospital-employed physicians was the loss of control over their professional lives, especially among those that were formerly in private practice. However, in terms of specific complaints, the following appeared to be the most common:

Lack of Job Security – Although many employment agreements between physicians and their hospital-employers have a term of three (3) or four (4) years, many such agreements permit the hospital to terminate such agreements upon notice of six (6) months or less, meaning that such agreements are effectively for 6-month terms, rather than 3 or 4 years of guaranteed duration. One way to deal with this issue is for the prospective physician-employee to negotiate a provision in the agreement that prohibits the hospital-employer from terminating the employment relationship prior to the end of the 3- or 4-year term, as the case may be, except for “cause” (i.e. certain types of clearly defined and objective misconduct by the physician).

Changes in Compensation Formula – In some instances, a hospital will seek to increase, during the course of the employment term, the productivity goals a physician-employee must meet in order to maintain a certain salary or to qualify for a productivity bonus.       Therefore, physician-employees may wish to negotiate a provision in their employment agreements, precluding an employer from changing productivity goals, either for salary or bonus purposes during the course of the employment term, without the consent of the physician-employee.

Call Schedule – In my experience, this topic is as important to physician-employees as their compensation. In order to avoid unpleasant surprises after the employment term begins, the issue of one’s call schedule should be addressed by the physician during initial conversations with the prospective hospital-employer. Further, from the physician’s perspective, the employment agreement should provide that the same formula shall be applied equally to all employed physicians in the same specialty in determining on-call responsibilities; and if there are exceptions, such as due to hospital bylaws that permit physicians of a certain age or practice seniority to take less “call,” the prospective physician-employee should be aware of such exceptions at the time he or she enters into their employment agreement. Also, the prospective physician-employee should be aware whether their call responsibilities shall be separately compensated or uncompensated.

Loss of Business Control – Typically, when a physician elects to become a hospital employee and agrees to having his or her practice acquired, the hospital takes control of the practice’s business functions, including determining how the phones are answered, how bills are generated and collected, and the signs on the door. While these business-related issues are ones a hospital generally will not agree to negotiate, this loss of business control is something of which every physician should be aware who is contemplating entering into an employment relationship with a hospital. In addition, a prospective physician-employee should also understand that when a hospital acquires a physician’s practice, the hospital typically expects to acquire the right to any ancillary revenue the practice might generate – something that may cause a physician-employee to lose income as compared to what he or she was earning prior to such acquisition. Again, this is an issue of which any prospective hospital-employed physician should be aware; and to the extent he or she is able to negotiate a “carve-out” exception in their employment agreement so as to preserve a right to all or a portion such ancillary revenue after the employment term begins (or have it taken into account in terms of calculating productivity for purposes of salary or bonus), that would be desirable.

Loss of Clinical Autonomy – This is another area about which many hospital-employed physicians complain, although not one that many hospital-employers are willing to negotiate. But, at the very least, the prospective physician-employee should understand prior to entering into any employment relationship how he or she is expected to document visits, follow-up with patients between visits, and coordinate care.

Non-Compete Covenants – Most hospital-employed physicians view these covenants as unfairly restricting their mobility in terms of changing jobs. This is one of the most important issues raised by any physician employment agreement. In the context of hospital-employed physicians, the prospective physician-employee should make certain, among other things, that (i) the geographic restriction is one he or she can live with if the employment relationship ends, especially considering the area in which the hospital is located (i.e., metropolitan or rural); and (ii) any such restrictive radius runs only from the facility at which the physician actually works, as opposed to, say, all satellite locations that might be the case with a corporate affiliate that has multiple hospitals in multiple counties. Also, the prospective physician-employee will want to ensure that any non-compete covenant is rendered null and void should his or her employment be terminated by the hospital without cause or in the event of a merger that results in the physician being employed by a hospital or health system that is different than the one with which the employment agreement was signed.

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